EMC gains on earnings; Textron slips on miss; Amgen up ahead of report; Amylin continues rally

By Kenneth Lim

Boston, April 20 - EMC Corp. convertibles gained on an earnings-dominated Wednesday after reporting a strong first quarter.

Textron Inc. slipped on the day following positive quarterly numbers that nevertheless missed estimates, while Amgen Inc. nudged higher on expectations of a good quarter.

Amylin Pharmaceuticals, Inc. continued to enjoy the momentum of a narrowed quarterly loss and positive analyst reports, gaining with the stock on the day.

The convertible market in general had a relatively quiet session because of the looming Good Friday holiday.

"We got through the S&P negative outlook on Monday, and now we're starting to wind down for the holiday," a trader said. "There's some spotty trading because of earnings, but otherwise there's not really a whole lot going on."

The trader said the market was mostly past the S&P announcement on Monday to downgrade the outlook for U.S. debt to negative from stable on concerns about the country's mounting deficits.

"Stocks took a hit on Monday, but I think they've mostly recovered," the trader said. "There was a knee-jerk reaction at the start...I don't think the market is saying that they disagree with S&P. I think the market is saying, hey, come to think of it, we've already known this for a while."

EMC gains on earnings

EMC's 1.75% convertible due 2013 rose about 7 points outright on Wednesday after the company met expectations for a strong first quarter.

The Hopkinton, Mass.-based IT infrastructure provider said its first-quarter earnings rose to $477.1 million, or 21 cents per share, from $372.7 million, or 17 cents per share, in the year-ago period.

The convertible was one of the more active names on Wednesday, trading at about 177.25 against a common stock price of $27.80. The common stock rose by 4.64% or $1.24 to close the day at $27.96.

"Good buying in EMC," a sellsider said. "Stock's doing well after Q1 earnings were up."

The sellsider said the convertible was well in the money, and its movements in the market closely reflect what the common stock is doing.

"It's a pretty straightforward kind of name for outrights," the sellsider said. "It's trading virtually like the stock because it's so far in the money. It's maturing in two years, so there's still a bit of duration risk there, but it's a really strong credit name."

The sellsider said EMC's earnings were in line with a positive session for technology-related names.

"They didn't beat the forecasts by a lot, but people were expecting a really good quarter and they delivered," the sellsider said. "Market sentiment is very positive about IT and tech names right now because people and businesses are spending again."

Textron misses estimates

Textron's 4.5% convertible due 2013 eased 2 points outright to 200.625 versus a $25.50 stock price on Wednesday after the company missed estimates for its first quarter.

The common stock closed the day at $25.51, lower by 1.09% or $0.28.

Textron is a Providence, R.I.-based aircraft maker.

The convertibles slipped in sympathy with the common stock, but the selling was muted in comparison to Tuesday's buying, a trader said.

"They were a lot more active yesterday," the trader said. "I think people were buying on expectations of a better quarter. They missed estimates, but they still managed to turn around from a loss, so I think some of the people who bought yesterday are happy to hold on."

Textron on Wednesday reported a first-quarter profit of $29 million, or 9 cents per share, from an $8 million loss in the year-ago quarter. Analysts were predicting a 17 cents per share profit.

But Textron maintained its full-year profit forecast of $1 to $1.15 per share.

"They met their own forecasts, so I wouldn't be too concerned," the trader said. "They missed Street estimates, but that's just the Street getting things wrong, not the company."

Amgen gains ahead of results

Amgen's 0.375% convertible due 2013 added a quarter-point on Wednesday in anticipation of the biotech's earnings report after the market closed.

The convertible changed hands at 99.5 against a common stock price of $56.15. Amgen common stock closed the day up by 1.81% or $1, at $56.18.

"Amgen saw decent buying," a trader said. "They're reporting later today, guys setting up for that."

The Thousand Oaks, Calif.-based company said after the market closed that first-quarter profit fell to $1.13 billion, or $1.20 per share, from $1.17 billion, or $1.18 per share. Excluding charges, earnings were $1.34 per share, beating analysts' estimates of $1.29 per share.

Amylin rides wave

Amylin's 3% convertible due 2014 ended a touch higher outright on Wednesday, trading at 90.125 versus a common stock price of $12.75, continuing its recent rally.

The common stock rose to $12.69, up by 1.6% or $0.20 on the day.

Amylin is a San Diego, Calif.-based biopharmaceutical company.

"Amylin's been climbing the past couple of days because of their results," a sellsider said. "They lowered their loss, and then their stock target got raised by some analysts, so it's been a good week for the stock."

Amylin on Monday said it lost $37.3 million, or 26 cents per share, in the quarter ended March 31, slightly below expectations for a 23 cents per share loss. But Citigroup on Tuesday raised its target for the stock to $17 from $15.

Mentioned in this article

Amgen Inc. Nasdaq: AMGN

Amylin Pharmaceuticals, Inc. Nasdaq: AMLN

EMC Corp. NYSE: EMC

Textron Inc. NYSE: TXT

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